Parcel and cargo delivery company FedEx (NYSE: FDX) announced better-than-expected revenue in Q2 CY2026, with sales up 12.5% year on year to $25.01 billion. Its non-GAAP profit of $6.31 per share was 6.6% above analysts’ consensus estimates.

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Company Overview

Sporting one of the largest air cargo fleets in the world, FedEx (NYSE: FDX) is a global provider of parcel and cargo delivery services.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, FedEx’s sales grew at a sluggish 2.4% compounded annual growth rate over the last five years. This fell short of our benchmarks and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. FedEx’s annualized revenue growth of 3.9% over the last two years is above its five-year trend, which is encouraging.

This quarter, FedEx reported year-on-year revenue growth of 12.5%, and its $25.01 billion of revenue exceeded Wall Street’s estimates by 4.3%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and suggests its products and services will face some demand challenges.

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Operating Margin

FedEx’s operating margin has generally stayed the same over the last 12 months, averaging 6% over the last five years. This profitability was paltry for an industrials business and caused by its suboptimal cost structureand low gross margin.

Looking at the trend in its profitability, FedEx’s operating margin might have fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, FedEx generated an operating margin profit margin of 6.2%, down 1.9 percentage points year on year. Since FedEx’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

FedEx’s weak 2.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Although it wasn’t great, FedEx’s two-year annual EPS growth of 6.5% topped its 3.9% two-year revenue growth.

We can take a deeper look into FedEx’s earnings to better understand the drivers of its performance. A two-year view shows that FedEx has repurchased its stock, shrinking its share count by 2.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q2, FedEx reported adjusted EPS of $6.31, up from $6.07 in the same quarter last year. This print beat analysts’ estimates by 6.6%. Over the next 12 months, Wall Street expects FedEx’s full-year EPS to stay about the same, moving from $20.21 to $20.23.

Key Takeaways from FedEx’s Q2 Results

We were impressed by how significantly FedEx blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed and its adjusted operating income fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4.7% to $302.94 immediately following the results.

FedEx may have had a tough quarter, but does that actually create an opportunity to invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).